Property transaction volumes have turned a corner, after consecutive interest rate hikes and tighter lending rules triggered New Zealand’s largest sales slump since 1983, CoreLogic Chief Economist Kelvin Davidson says
CoreLogic NZ’s Monthly Housing Chart Pack shows a 7.5% increase in residential sales numbers (via estate agents and private transactions) occurred in May compared to the same time last year. It’s the first annual increase in sales transactions since May 2021.
The figures also showed new listings over the four weeks ending 6 June remained -28% below this time last year and -20% below the previous five-year average.
These figures provide further signals that the market may be approaching a trough.
While it’s probably too early to emphatically call it a new trend, it is now looking more certain that sales volumes have finally bottomed out. The annual increase of 7.5% after such a long decline will be welcome news for many (although not all) property market participants.
As the flow of new listings remains low against a backdrop of rising sales, we are starting to see a tightening of stock on the market, which in turn may start to contribute to competitive price pressures.
Available listings are about 5% lower than this time last year, with stock tightening in key regions such as Auckland, Bay of Plenty, and Wellington.
Overall, 2023 is shaping up as a ‘year of two halves’.
Factors such as a broad peak for mortgage rates and still-strong employment should underpin some kind of growth in sales/mortgage activity later in 2023, with prices finding a floor – which will be good or bad, depending on your perspective.
The end of the downturn doesn’t suddenly mean the start of an upturn, however. After all, housing affordability is still stretched, and caps on debt to income ratios loom large in 2024.
June Housing Chart Pack highlights:
- Residential real estate is worth $1.57 trillion.
- Nationally values fell by -10.2% in the year to May, slightly smaller than the year to March (10.5%) and year to April (10.3%).
- The upper quartile continues to lead the downturn, with values down -14% from peak, compared to -10.9% and -8.8% falls across the mid and lower quartiles respectively.
- The number of property sales in May was 7.5% higher than a year earlier, the first annual increase since May 2021.
- There were 6,439 new listings over the four weeks ending June 6, down from 8,996 this period last year.
- Total stock on market is 33,798, -4.5% below this time last year.
- First home buyers’ market share of 25% remains strong, particularly in Auckland at 28%. Mortgaged multiple property owners (investors) have a comparatively low market share of 20%.
- Nationally rental growth remains within the 3-4% range but is likely to accelerate as net migration increases and rental stock stays low
- Gross rental yields nationally are back to 3% for the first time since March 2021, mainly due to the continued falls in property values.
- Around 50% of NZ’s existing mortgages by value are currently fixed but due to reprice onto a new (generally higher) mortgage rate over the next 12 months.
- Inflation seems to have passed its peak and the Reserve Bank will wait to see the effects of the 5.5% OCR for this tightening cycle. Mortgage rates are close to, or already at, their peak.
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